Correlation Between Ruentex Development and Union Insurance

Can any of the company-specific risk be diversified away by investing in both Ruentex Development and Union Insurance at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ruentex Development and Union Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ruentex Development Co and Union Insurance Co, you can compare the effects of market volatilities on Ruentex Development and Union Insurance and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ruentex Development with a short position of Union Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ruentex Development and Union Insurance.

Diversification Opportunities for Ruentex Development and Union Insurance

0.57

Correlation Coefficient

Ruentex Development  Union Insurance

Very weak diversification

The 3 months correlation between Ruentex and Union is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ruentex Development Co and Union Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Insurance and Ruentex Development is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ruentex Development Co are associated (or correlated) with Union Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Insurance has no effect on the direction of Ruentex Development i.e., Ruentex Development and Union Insurance go up and down completely randomly.

Pair Corralation between Ruentex Development and Union Insurance

Assuming the 90 days trading horizon Ruentex Development is expected to generate 4.6 times less return on investment than Union Insurance. But when comparing it to its historical volatility, Ruentex Development Co is 1.31 times less risky than Union Insurance. It trades about 0.02 of its potential returns per unit of risk. Union Insurance Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,550  in Union Insurance Co on October 5, 2024 and sell it today you would earn a total of  1,585  from holding Union Insurance Co or generate 102.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ruentex Development Co  vs.  Union Insurance Co

Ruentex Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ruentex Development Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Union Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Union Insurance Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Union Insurance is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ruentex Development and Union Insurance

The main advantage of trading using opposite Ruentex Development and Union Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ruentex Development position performs unexpectedly, Union Insurance can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Union Insurance will offset losses from the drop in Union Insurance's long position.

The idea behind Ruentex Development Co and Union Insurance Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.